July 2014

IN THE SUPREME COURT OF THE STATE OF OREGON

EVERICE MORO, TERRI DOMENIGONI, CHARLES CUSTER, JOHN
HAWKINS, MICHAEL ARKEN, EUGENE DITTER, JOHN O’KIEF,
MICHAEL SMITH, LANE JOHNSON, GREG CLOUSER, BRANDON
SILENCE, ALISON VICKERY, and JIN VOEK,
Petitioners,

v.

STATE OF OREGON, STATE OF OREGON by and through the
Department of Corrections, LINN COUNTY, CITY OF PORTLAND,
CITY OF SALEM, TUALATIN VALLEY FIRE & RESCUE,
ESTACADA SCHOOL DISTRICT, OREGON CITY SCHOOL
DISTRICT, ONTARIO SCHOOL DISTRICT, BEAVERTON SCHOOL
DISTRICT, WEST LINN SCHOOL DISTRICT, BEND SCHOOL
DISTRICT, and PUBLIC EMPLOYEES RETIREMENT BOARD,
Respondents,

and

LEAGUE OF OREGON CITIES; and OREGON SCHOOL BOARDS
ASSOCIATION,
Intervenors.

S061452 (Control)


WAYNE STANLEY JONES,
Petitioner,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD; ELLEN
ROSENBLUM, Attorney General; and JOHN A. KITZHABER, Governor,
Respondents.

S061431


July 3, 2014 08:29 AM

MICHAEL D. REYNOLDS,
Petitioner,

v.

PUBLIC EMPLOYEES RETIREMENT BOARD, State of Oregon; and
JOHN A. KITZHABER, Governor, State of Oregon
Respondents.

S061454


GEORGE A. RIEMER,
Petitioner,

v.

STATE OF OREGON; OREGON GOVERNOR JOHN KITZHABER;
OREGON ATTORNEY GENERAL ELLEN ROSENBLUM; OREGON
PUBLIC EMPLOYEES RETIREMENT BOARD; and OREGON
PUBLIC EMPLOYEES RETIREMENT SYSTEM
Respondents.

S061475 & S061860


BRIEF OF AMICUS CURIAE
INTERNATIONAL ASSOCIATION OF FIRE FIGHTERS


Sarah K. Drescher
OSB 042762
Tedesco Law Group
3021 NE Broadway
Portland, OR 97232
Phone: (866) 697-6015
sarah@miketlaw.com





Thomas A. Woodley
Douglas L. Steele
WOODLEY & McGILLIVARY
1101 Vermont Ave, N.W.
Suite 1000
Washington, D.C. 20005
Phone: (202) 833-8855
taw@wmlaborlaw.com
dls@wmlaborlaw.com

Counsel for Amicus Curiae
i
INDEX OF CONTENTS

INDEX OF CONTENTS .................................................................................... i
INDEX OF AUTHORITIES ............................................................................ iii
I. INTRODUCTION ........................................................................................ 1
II. STATEMENT OF THE CASE ............................................................... 2
A. Nature of the Action .................................................................................. 2
B. Nature of the J udgment Sought to be Reviewed ...................................... 3
C. Statutory Basis of J urisdiction .................................................................. 3
D. Entry of J udgment and Timeliness of Appeal .......................................... 3
E. Questions Presented .................................................................................. 4
F. Summary of the Argument ........................................................................ 4
G. Summary of Material Facts ...................................................................... 5
III. ASSIGNMENT OF ERROR .................................................................10
SB 822 §§ 1, 3, 5, 7 and SB 861 §§ 1, 3, and 8 Impair the COLA
Obligations of the PERS Contract in Violation of Article I, Section 21
of the Oregon Constitution or in the Alternative, Breach Those Terms
of the PERS Contract. ...................................................................................10

A. Standard of Review ..................................................................................10
B. Preservation of Error ...............................................................................11
C. Argument ..................................................................................................11
1. Legal Standard of Oregon Contract Clause Claims ........................11
2. PERS Members Are Contractually Entitled to the COLA
Benefit Formula ...................................................................................13
ii
i. Both ORS 238.360 and ORS 238A.210 Established a
Contractual Benefit Formula .........................................................14

ii. The Law of Oregon’s Sister States Supports a Finding that
the COLA Benefit Formula is a Contractual Obligation ............17

3. The Changes Implemented through the Enactment of SB 822
and SB 861 Substantially Impair or Breach COLA Obligations
in Violation of Article I, Section 21 ...................................................20

4. Oregon Law Does Not Recognize a Public Purpose Defense to
Violations of Article I, Section 21 ......................................................22

IV. CONCLUSION .......................................................................................24
CERTIFICATE OF COMPLIANCE WITH ORAP 5.05(2)(d) ...................25
CERTIFICATE OF FILING ...........................................................................26
CERTIFICATE OF SERVICE .......................................................................26

iii
INDEX OF AUTHORITIES

Oregon Cases

Eckles v. State of Oregon, 306 Or. 380, 760 P.2d 846 (1988) ................... passim

Hughes v. State, 314 Or. 1, 838 P.2d 1018 (1992) .................................... passim

State v. Kennedy, 295 Or. 260, 666 P.2d 1316 (1983) .......................................10

Strunk v. Pub. Employees Ret. Bd., 338 Or. 145, 108 P.3d 1058 (2005) ... passim

Taylor v. Multnomah County Deputy Sheriff’s Ret. Bd., 265 Or. 445,
510 P.2d 339 (1973) ........................................................................................14
Oregon Constitution

Or. Const., Art. I, § 21 ........................................................................................11
Oregon Statutes

Or. Laws 1973, ch. 695 ......................................................................................... 8

Or. Laws 2013, ch. 2 (Spec. Sess.) ...................................................................2, 3

Or. Laws 2013, ch. 53 .................................................................................. 2, 3, 7

Or. Laws. 1971, ch. 738 ........................................................................................ 8

ORS 238.360 (2011) .................................................................................. 6, 8, 15

ORS 238A.025 ...................................................................................................... 6

ORS 238A.210 (2011) ............................................................................... 6, 8, 16

ORS 238A.470 (2011) ................................................................................. 17, 19
Other Cases

Allen v. City of Long Beach, 45 Cal. 2d 128, 287 P.2d 765 (Cal. 1955) ............22

Bakenhus v. City of Seattle, 48 Wash. 2d 695, 296 P.2d 536 (Wash. 1956) 18, 22

iv
Carman v. Alvord, 31 Cal. 3d 318, 644 P.2d 192 (Cal. 1982) ...........................18

Fields v. Elected Officials’ Ret. Plan, 320 P.3d 1160 (Ariz. 2014) ...................19

Hanson v. City of Idaho Falls, 92 Idaho 512, 446 P.2d 634 (Idaho 1968) ........22

Nash v. Boise City Fire Dep’t, 104 Idaho 803, 663 P.2d 1105 (Idaho 1983) ....19

Pasadena Police Officers Ass’n v. City of Pasadena, 195 Cal. Rptr. 339
(Cal. Ct. App. 1983) ........................................................................................19

Pub. Employees’ Ret. Bd. of the State of Nevada v. Washoe County,
96 Nev. 718, 615 P.2d 972 (Nev. 1980) ............................................. 18, 22, 23

Wash. Fed’n of State Employees v. State, 98 Wash. 2d 677, 658 P.2d 634
(Wash. 1983) ............................................................................................ 22, 23

Yeazell v. Copins, 98 Ariz. 109, 402 P.2d 541 (Ariz. 1965) ..............................18

1
I. INTRODUCTION

This brief is filed on behalf of the International Association of Fire
Fighters (hereinafter “IAFF”), amicus curiae, in support of the Moro
Petitioners.
The IAFF is an organization representing more than 300,000 professional
fire fighters, paramedics, and other emergency responders in the United States
and Canada. More than 3,200 IAFF affiliates protect the lives and property of
over 85 percent of the continent’s population in nearly 6,000 communities in
every state in the United States and in Canada. The IAFF’s local affiliates
represent fire fighters throughout Oregon with respect to collective bargaining
over the terms and conditions of employment including compensation issues.
The IAFF is familiar with the issues in this case, and consistent with its interest
and capacity as an advocate for professional fire fighters, paramedics, and
emergency responders in Oregon and across the United States and due to its
extensive expertise and knowledge, the IAFF believes that it will provide a
unique perspective to this Court regarding the issues herein.
Ensuring that public employers provide the pension benefits they have
promised their employees is an extremely important issue for fire fighters. Fire
fighters risk their health and safety to protect the general public. In many
jurisdictions, including Oregon, fire fighters accept these risks based on the
understanding that they will be compensated now and in the future through their
2
pension benefits. A public employer’s attempt to unilaterally alter the benefits
that it has promised to its employees runs afoul of the Oregon Constitution. As
this case will have a precedential effect throughout Oregon, the IAFF has a
substantial interest in ensuring that Oregon public employers are made to
adhere to the State’s Constitution and that fire fighters continue to receive those
pension benefits they have been promised in return for their service to the
people of Oregon.
II. STATEMENT OF THE CASE

A. Nature of the Action

This case involves the direct challenge of the constitutionality of certain
sections of the Oregon Session Laws of 2013. Specifically, as related to this
brief, the petitioners are challenging the reduction of the cost-of-living
adjustment (“COLA”) for all retirees of the Public Employees Retirement
System (“PERS”) as called for in Oregon Laws 2013, chapter 53 (“SB 822”)
and Oregon Laws 2013, chapter 2 (Special Session) (“SB 861”). Petitioners
Everice Moro, Terri Domenigoni, Charles Custer, John Hawkins, Michael
Arken, Eugene Ditter, John O’Kief, Michael Smith, Lane Johnson, Greg
Clouser, Brandon Silence, Alison Vickery, and Jin Voek (“Moro Petitioners”)
allege that sections 1, 3, 5, and 7 of SB 822 and sections 1, 3, and 8 of SB 861
impair the obligations of the PERS contract in violation of Article I, Section 21
of the Oregon Constitution, and/or constitute of breach of the PERS contract
3
entitling petitioners to a remedy. The IAFF joins the Moro Petitioners in
requesting that this court declare SB 822 and SB 861 to be unconstitutional and
void in whole or in part, or alternatively declare that petitioners are entitled to
damages for breach of contract.
B. Nature of the J udgment Sought to be Reviewed

This case involves direct judicial review of a legislative enactment, and
therefore, there is no judgment sought to be reviewed.
C. Statutory Basis of J urisdiction

The Oregon Legislature expressly conferred jurisdiction on this Court to
determine whether any portions of SB 822 or SB 861 breach a contract between
PERS members and their employers, violates any constitutional provision, or
are invalid for any other reason. Or. Laws 2013, ch. 53, § 19; Or. Laws 2013,
ch. 2, § 11 (Spec. Sess.).
D. Entry of J udgment and Timeliness of Appeal

In addition to conferring jurisdiction in this Court, the Oregon
Legislature also expressly authorized any party who would be adversely
affected by the acts to petition this Court for review within 60 days after the
effective date of the acts. Or. Laws 2013, ch. 53, § 19(2)(a); Or. Laws 2013,
ch. 2, § 11(2)(a) (Spec. Sess.). SB 822 became effective on May 6, 2013, Or.
Laws 2013, ch. 53, § 22, whereas SB 861 became effective October 8, 2013,
Or. Laws 2013, ch. 2, § 13 (Spec. Sess.). The Moro Petitioners filed a petition
4
challenging SB 822 on July 1, 2013 and thereafter filed an amended petition
challenging SB 861 on December 6, 2013. (Moro Pet’rs’ Brief at 3.)
Therefore, jurisdiction is properly before this Court and the Moro Petitioners’
petitions for direct review are timely.
E. Questions Presented

The IAFF’s brief addresses the first question presented by the Moro
Petitioners:
Do SB 822 or SB 861 impair any obligations of the PERS Contract
in violation of Article I, section 21 of the Oregon Constitution or in
the alternative, breach the PERS Contract?

(Moro Pet’rs’ Brief at 3.)
F. Summary of the Argument

The question of whether SB 822 or SB 861 impair any obligations of the
PERS contract in violation of the Oregon Constitution, or alternatively
constitute a breach of the PERS Contract, is of substantial importance to IAFF
members who have served as fire fighters, paramedics, and emergency
responders for public employers in Oregon. This Court has previously
recognized that COLA benefits are contractual obligations under PERS. See
Strunk v. Pub. Employees Ret. Bd., 338 Or. 145, 220-25, 108 P.3d 1058 (2005).
Both Oregon case law and the case law of Oregon’s sister states support finding
that a PERS member’s right to COLA is not limited just to the benefit itself, but
also the formula by which it will be calculated.
5
The Oregon Legislature’s passage of SB 822 and SB 861 directly impairs
contractual benefits afforded to PERS members in violation of Oregon law.
The changes were made not to address funding problems with the plan, but
rather to provide public employers with greater financial flexibility in the 2013-
2015 budget as well as future budgets. The Legislature sought to create this
flexibility by denying PERS members their promised benefits and thereafter re-
directing the promised funds to other governmental functions. Allowing SB
822 and SB 861 to stand would deny PERS members their contractual benefits
and negate the protections that the Oregon Contract Clause is meant to provide.
Therefore, the challenged provisions of SB 822 and SB 861 should be declared
unconstitutional and null and void.
G. Summary of Material Facts

A more detailed discussion of all of the relevant material facts of this
case, including the history of the PERS legislation, can be found in the Moro
Petitioners’ Brief. (See Moro Pet’rs’ Brief at 6-41.) For the purposes of this
amicus brief, the IAFF will highlight facts relevant to the question of whether
SB 822 and SB 861 violate the Contracts Clause of the Oregon Constitution.
PERS members who have served public employers are categorized in
three different groups: (1) Tier One members – those employees who joined
PERS prior to January 1, 1996; (2) Tier Two members – public employees who
joined PERS after January 1, 1996, but prior to August 29, 2003; and (3)
6
Oregon Public Service Retirement Plan (“OPSRP”) members – public
employees working for a public employer on or after August 29, 2003 that had
not previously established Tier One or Tier Two membership in PERS. Strunk,
338 Or. at 158-59; see also ORS 238A.025(3). The rights and benefits of Tier
One and Tier Two members are governed by ORS chapter 238 and the rights of
OPSRP members are governed by ORS chapter 238A. ORS 238A.025.
No matter which group or corresponding benefit formula that an
employee finds him or herself in, “PERS historically has increased such
[benefit] allowance through annual cost-of-living adjustments (COLAs).”
Strunk, 338 Or. at 162. Prior to the enactment of SB 822 and SB 861, COLAs
were based on the Consumer Price Index (“CPI”) and were capped at two
percent per year of each member’s allowance. ORS 238.360 (2011) (Moro
Pet’rs’ App-1); ORS 238A.210 (2011) (Moro Pet’rs’ App-4). In those years
where the CPI exceeded two percent, Tier One and Tier Two members were
entitled to accumulate the excess percentage to be used as a “bank” for
subsequent years where the CPI fell below the two percent statutory cap. ORS
238.360(3) (2011) (Moro Pet’rs’ App-1). Since the entitlement to COLA was
enacted, the CPI has frequently been above two percent. (Special Master Final
7
Report “SMFR”, p.24, Moro Pet’rs’ Excerpt of Record at 188.)
1
This has
resulted in most retired petitioners possessing a COLA “bank.” (Id.)
In preparation of the 2013 legislative session PERS asked its actuary to
estimate the system-wide effects that would take place if the modifications
proposed in SB 822 were enacted. (SMFR, p.29, ER-193.) The actuary
reported that the benefit reductions called for in SB 822 “would reduce the total
liabilities of the system by $3.2 billion, and reduce accrued liabilities of the
system by $2.6 billion. Both sums were expressed on a present value basis.”
(Id.) The actuary also reported that “projected uncollared employer
contribution rates would be reduced by 2.5 percent in the 2013-15 biennium.”
(Id.)
SB 822 was passed by the Oregon Legislature during the 2013 Regular
Session. Or. Laws 2013, ch. 53. The changes to PERS became effective May
6, 2013. Id. at § 22. Regardless of employment status (active, inactive, retired),
the law reduced COLA benefits for all PERS members. Id. at §§ 1, 3, 5, 7. In
discussing the purported rationale for these changes, legislators did not point to
any financial problems with COLA benefits, but rather focused on how
reducing these benefits could facilitate a reduction in employer costs and allow
for money to be devoted to other governmental functions — specifically the
state’s education system. (See ER-58-67; ER-73-80.) Moreover, legislators

1
The Moro Petitioners’ Excerpt of Record is hereafter cited as
“ER-___.”
8
were plainly aware that they would be denying PERS members a promised
benefit.
2
(ER-59-60; ER-75.)
Retirement benefits under PERS have been adjusted annually since July
1, 1972 to reflect the increase or decrease in the cost of living as reflected in the
CPI for Portland. See Or. Laws. 1971, ch. 738, §§ 11-12. When originally
enacted, the adjustment was limited to a maximum increase or decrease of one
and one-half percent of monthly retirement income, with employees being able
to accumulate CPI in excess of the statutory cap for years in which the CPI was
below the statutory cap. Id. at §§ 11(1), (3). The 1973 legislature raised the
statutory cap to the two percent that has remained in place until the legislation
at issue here.
3
See Or. Laws 1973, ch. 695, § 1; see also ORS 238.360 (2011)
(Moro Pet’rs’ App-1); ORS 238A.210 (2011) (Moro Pet’rs’ App-4).
SB 822 reduced the statutory cap on COLA “from 2.0 percent to 1.5
percent effective August 1, 2013” and eliminated employees’ ability to bank

2
Representative Buckley, co-chair of the Joint Committee on Ways
and Means, in discussing SB 822 stated:
We’ve given our word as a state in two different directions, and we
can’t keep both those promises. We’ve promised retirees and
workers a certain benefit package that they’ve worked for, many of
them for decades. We’ve promised our kids educational
opportunities at least as good as the ones that we had when we
were growing up. . . . [We cannot] keep both those promises.
(ER-59.)

3
Since its inception, OPSRP members have also received up to a
two percent COLA increase, but are not entitled to bank any CPI amounts in
excess of the two percent statutory cap. See ORS 238A.210 (2011) (Moro
Pet’rs’ App-4).
9
excess CPI. (SMFR, p.30, ER-194.) SB 822 reduced the annual COLA
percentages as follows:
Annual Benefit Amount Applicable COLA
First $20,000 2.00%
$20,000 to $40,000 1.50%
$40,000 to $60,000 1.00%
$60,000 or more 0.25%

(SMFR, p.30, ER-194.) SB 861 reduced this benefit even further, setting the
new benefit entitlement as follows:
Yearly Benefit
Senate Bill
822 COLA
(No longer
in effect
after
approval of
SB 861)
Senate Bill 861 (*Ends in 2019)

COLA First
Supplemental
Payment for All
benefit
recipients*
Second
Supplemental
payment for
benefit recipients
whose yearly
benefit is $20,000
or less*
< $20,000 2.00% 1.25% 0.25% 0.25%
$20,000 - $40,000 1.50% ---
$40,000 - $60,000 1.00%
> $60,000 0.25% 0.15% $150

(SMFR, p.33, ER-197.) As of December 31, 2013, PERS is estimated to be 87
percent funded (excluding side accounts) and 96 percent funded (including side
accounts). (SMFR, p.35, ER-199.)
The implementation of SB 822 and SB 861 are projected to deny
members billions of dollars in benefits. (Id.) It is estimated that the change in
10
COLA alone “will result in $60 to $70 million in projected benefits not being
paid through 2015.” (SMFR, p.36, ER-200.)
III. ASSIGNMENT OF ERROR

SB 822 §§ 1, 3, 5, 7 and SB 861 §§ 1, 3, and 8 Impair the COLA
Obligations of the PERS Contract in Violation of Article I,
Section 21 of the Oregon Constitution or in the Alternative,
Breach Those Terms of the PERS Contract.

A. Standard of Review

This Court has previously outlined the standard or review for this type of
proceeding in its decision in Strunk. Where the legislature has conferred
jurisdiction upon this Court to determine all issues as original matters, as it has
done here, this Court has “appointed a special master to conduct the trial of all
factual issues and to assemble the record.” Strunk, 338 Or. at 155. Having
received the record from the Special Master, this Court conducts “a de novo
review of the evidentiary record and a plenary review of the legal issues
presented.” Id.
When “presented with multiple bases for disposition, this court generally
considers the issues hierarchically.” Id. at 171 (citing State v. Kennedy, 295 Or.
260, 262, 666 P.2d 1316 (1983)). Accordingly, claims addressing matters of
state law are considered first. Strunk, 338 Or. at 171; Eckles v. State of Oregon,
306 Or. 380, 386, 760 P.2d 846 (1988).
11
B. Preservation of Error

The Moro Petitioners preserved this assignment of error through their
First, Fourth, Fifth, and Eighth Claims for Relief in their original and amended
petitions.
C. Argument

1. Legal Standard of Oregon Contract Clause Claims

Article I, section 21 of the Oregon Constitution provides: “No . . . law
impairing the obligation of contracts shall ever be passed.” Or. Const., Art. I, §
21. This Court has recognized that this provision applies to both state and
private contracts. Eckles, 306 Or. at 390. A two-step analysis is conducted to
determine whether a law amounts to a violation of this provision. Hughes v.
State, 314 Or. 1, 14, 838 P.2d 1018 (1992). The court must first determine
“whether a contract exists to which the person asserting an impairment is a
party . . . .” Id. Next, the court determines “whether a law of this state has
impaired an obligation of that contract.” Id.
In making these determinations the court will apply the general principles
of contract law — even when the state is a party. Id. However, where the state
is an alleged party, the following additional rules will be applied: “(1) a state
contract will not be inferred from legislation that does not unambiguously
express an intention to create a contract; (2) the Contract Clause does not limit
12
the state’s power of eminent domain; and (3) the state may not contract away its
‘police power.’” Id.
When determining whether a statute creates a contractual obligation, “the
context in which the . . . statute is enacted is of primary importance.” Id. at 25.
Statutes must not be viewed in isolation, but rather “in the context of their
collective operation” with all of the statutory provisions at issue. Strunk, 338
Or. at 183 n.34.
Once a contractual obligation has been established, the state may only
avoid it through those limits “found within the language or history of Article I,
section 21, itself.” Eckles, 306 Or. at 399. The prohibition against the state
contracting away its police power does not extend “so far as to permit the state
to disregard a financial guarantee to persons or corporations who participate
in a state . . . system.” Id. (emphasis added). Furthermore, “the state cannot
avoid a constitutional command by ‘balancing’ it against another of the
state’s interests or obligations, such as protection of the ‘vital interests’ of the
people.” Id. (emphasis added).
Once a determination has been made that a contractual obligation exists,
the second step of the court’s analysis is to determine whether the state has
eliminated any part of that obligation — thereby impairing the contract. See,
e.g., Hughes, 314 Or. at 31 (finding that the unilateral statutory change removed
the state’s contractual liability to the employees and constituted an
13
impermissible impairment); Eckles, 306 Or. at 399-01 (evaluating the various
sections of the legislation to determine whether they constitute a change that
would impair the contract). Even where the law in question does not remove or
alter a contractual obligation, but instead commands non-performance, it will be
considered a breach and will entitle the adversely affected party to a remedy for
the breach. Hughes, 314 Or. at 32-33.
For the reasons discussed in greater detail below, the COLA provisions
altered by SB 822 and SB 861 are contractual in nature and subject to the
constitutional protections of Article I, section 21 of the Oregon Constitution.
Section 1, 3, 5, and 7 of SB 822 and sections 1, 3, and 8 of SB 861 impair the
COLA benefit formulas public employers are obligated to provide to their
employees in accordance with the PERS contact, and should be declared
unconstitutional and void in whole or in part. In the alternative, the above
referenced provisions of SB 822 and SB 861 constitute a breach of the PERS
contract for which damages should be awarded.
2. PERS Members Are Contractually Entitled to the
COLA Benefit Formula

PERS has been found to constitute a contract between the State of
Oregon and its employees. Hughes, 314 Or. at 18. Moreover, this Court has
recognized “that the legislature intended and understood that PERS constituted
an offer, by the state to its employees, for a unilateral contract.” Id. at 20.
Offered as a unilateral contract, “[a]n employee’s contract right to [PERS]
14
pension benefits become[] vested at the time of his or her acceptance of
employment.” Id. This vesting policy adopts “the concept that contractual
rights can arise prior to the completion of the service necessary to a pension.”
Taylor v. Multnomah County Deputy Sheriff’s Ret. Bd., 265 Or. 445, 451, 510
P.2d 339 (1973).
i. Both ORS 238.360 and ORS 238A.210 Established
a Contractual Benefit Formula

In Strunk, this Court concluded that annual COLA benefits were part of
the statutory PERS contract. Strunk, 338 Or. at 221. Therefore, the 2003
legislation that sought to eliminate annual COLAs was deemed “inconsistent
with the legislature’s promise set out in ORS 238.360(1) (2001).” Id. at 223.
Just as this Court found that COLA benefits are part of the PERS contract, so
too should it find that employees are contractually entitled to the statutorily
prescribed COLA benefit formula.
Prior to the enactment of SB 822 and SB 861, COLA benefits for Tier
One and Tier Two employees were calculated as follows:
(1) As soon as practicable after January 1 each year, the Public
Employees Retirement Board shall determine the percentage
increase or decrease in the cost-of-living for the previous calendar
year, based on the Consumer Price Index (Portland area—all
items) as published by the Bureau of Labor Statistics of the U.S.
Department of Labor for the Portland Oregon, area. Prior to July 1
each year the allowance which the member or the member’s
beneficiary is receiving or is entitled to receive on August 1 for the
month of July shall be multiplied by the percentage figure
determined, and the allowance for the next 12 months beginning
July 1 adjusted to the resultant amount.
15
(2) Such increase or decrease shall not exceed two percent of
any monthly retirement allowance in any year and no allowance
shall be adjusted to an amount less than the amount to which the
recipient would be entitled if no cost-of-living adjustment were
authorized.
(3) The amount of any cost-of-living increase or decrease in
any year in excess of the maximum annual retirement allowance
adjustment of two percent shall be accumulated from year to year
and included in the computation of increases or decreases in
succeeding years.

ORS 238.360 (2011) (Moro Pet’rs’ App-1) (emphasis added).
Just as the Court recognized in Strunk when considering the promissory
nature of subsection one, 338 Or. at 221, the statutory language of subsections
two and three similarly demonstrate that the legislature intended that members
receive COLAs up to two percent when called for by the CPI and be eligible to
bank excess CPI above the statutory cap for subsequent years.
Having previously determined that PERS members are contractually
entitled to receive COLA benefits, it is axiomatic that the formula used to
calculate those benefits should also be found to be a contractual obligation. A
contrary finding would permit the Legislature the ability to constantly minimize
the benefit formula until it reached the point that the promised benefit is
effectively eviscerated — exactly what the Legislature is attempting to do here
with SB 822 and SB 861.
Although this Court’s consideration of COLA benefits in Strunk was
limited to benefits for Tier One and Tier Two members, a similar analysis and
finding of contractual obligation should be applied to OPSRP COLA benefits
16
for service performed and salary earned prior to the enactment of SB 822 and
SB 861. While lacking the ability to bank CPI in excess of the statutory cap,
the COLA benefit for OPSRP follows a similar calculation formula to that
applied to Tier One and Tier Two members:
(1) As soon as practicable after January 1 each year, the Public
Employees Retirement Board shall determine the percentage
increase or decrease in the cost of living for the previous calendar
year, based on the Portland-Salem, OR-WA, Consumer Price Index
for All Urban Consumers for All Items, as published by the Bureau
of Labor Statistics of the United States Department of Labor.
Before July 1 each year, the board shall adjust every pension
payable under ORS 238A.180, 238A.185 and 238A.190, every
disability benefit under ORS 238A.235 and every death benefit
payable under ORS 238A.230 by multiplying the monthly payment
by the percentage figure determined by the board. If a person has
been receiving a pension or benefit for less than 12 months on July
1 of a calendar year, the board shall make a pro rata reduction of
the adjustment based on the number of months that the pension or
benefit was received before July 1 of the year. The adjustment
shall be made for the payments payable on August 1 and
thereafter.
(2) An increase or decrease in the benefit payments under this
section may not exceed two percent in any year. A pension or
death benefit may not be adjusted to an amount that is less than the
amount that would have been payable if no cost-of-living
adjustment had been made since the pension or death benefit first
became payable.

ORS 238A.210 (2011) (Moro Pet’rs’ App-4) (emphasis added).
The language of ORS 238A.210 similarly tracks the language of ORS
238.360, and should therefore be found to be promissory in nature and creating
a contractual obligation. This position is further bolstered by the legislative
guidance provided through the enactment of ORS 238A.470 which states:
17
The Legislative Assembly may change the benefits payable to
persons who become members of the Public Employees
Retirement System on or after August 29, 2003, as described in
ORS 238A.025, as long as the change applies only to benefits
attributable to service performed and salary earned on or after the
date the change is made.

ORS 238A.470 (2011) (Moro Pet’rs’ App-5). While the Legislature reserved
the right to make future changes to OPSRP, it expressly limited the application
of those changes “only to benefits attributable to service performed and salary
earned on or after the date the change is made.” ORS 238A.470 (2011) (Moro
Pet’rs’ App-5) (emphasis added). This language, coupled with the language
selected for ORS 238A.210, demonstrates that the Legislature intended to
provide OPSRP members with a contractual entitlement to the COLA benefits
based on CPI up to the statutory cap of two percent applicable to service
provided and salary earned prior to any future changes.
As COLA has already been recognized as a protected contractual right,
arguing that the COLA formula is not a contractual right is nonsensical. The
COLA formula defines the COLA itself. The formula is not separate from the
COLA — it is the COLA. Therefore, the formula is the protected benefit that
may not be impaired.
ii. The Law of Oregon’s Sister States Supports a
Finding that the COLA Benefit Formula is a
Contractual Obligation

A number of Oregon’s sisters states have similarly recognized that
pension benefits vest prior to an employee having completed all of the
18
requirements to receive a pension. See, e.g., Carman v. Alvord, 31 Cal. 3d 318,
325, 644 P.2d 192, 196 (Cal. 1982) (“By entering public service an employee
obtains a vested contractual right to earn a pension on terms substantially
equivalent to those then offered by the employer.”); Pub. Employees’ Ret. Bd.
of the State of Nevada v. Washoe County, 96 Nev. 718, 721, 615 P.2d 972, 974
(Nev. 1980) (“By rendering services and making contributions, an employee
acquires a limited vested right to pension benefits which may not be eliminated
or substantially changed by unilateral action of the governmental employer to
the detriment of the member.”); Yeazell v. Copins, 98 Ariz. 109, 115, 402 P.2d
541, 545 (Ariz. 1965) (stating that “the right to a pension becomes vested upon
acceptance of employment”); Bakenhus v. City of Seattle, 48 Wash. 2d 695,
701, 296 P.2d 536, 540 (Wash. 1956) (adopting the rule that “the employee who
accepts a job to which a pension plan is applicable contracts for a substantial
pension and is entitled to receive the same when he has fulfilled the prescribed
conditions”).
Recognizing that an employee’s pension rights vest prior to their
satisfying every requirement necessary to begin drawing the pension grants
employees assurances that the promises they have received will be honored
after they have served the employer for the requisite period of time. Pub.
Employees’ Ret. Bd., 96 Nev. at 722 n.6, 615 P.2d at 974 n.6; Pasadena Police
Officers Ass’n v. City of Pasadena, 195 Cal. Rptr. 339, 343 (Cal. Ct. App.
19
1983) (noting that employee is entitled to not only those benefits already
earned, but also those “promised during his prior service”). This includes not
only those promises made at the beginning of employment, but also those made
during the course of an employee’s service. Fields v. Elected Officials’ Ret.
Plan, 320 P.3d 1160, 1166 (Ariz. 2014) (finding that employee “has a right in
the existing [benefit increase] formula by which his benefits are calculated as of
the time he began employment and any beneficial modifications made during
the course of his employment” (emphasis added)); Nash v. Boise City Fire
Dep’t, 104 Idaho 803, 808, 663 P.2d 1105, 1110 (Idaho 1983) (finding that the
employee was entitled to the COLA benefit formula that had been in place for
the last 15 years of his career).
The COLA benefit formula for Tier One and Tier Two employees has
been in place for nearly 40 years. It is a promise that employees have relied on
in choosing to continue to serve their respective government employers, and,
along with the contractual entitlement to COLA benefits, should be found to
represent a contractual obligation. Similarly, OPSRP members have operated
with the understanding that the Legislature’s statutory proclamation that any
changes to benefits would only be applied prospectively, entitles them to the
COLA benefits as laid out in ORS 238A.210 for the period of service taking
place prior to the legislative change. See ORS 238A.470 (2011) (Moro Pet’rs’
App-5).
20
It is important to highlight that the Legislature is well aware that these
benefit formulas were promises made to PERS members — promises that they
have relied upon in serving their respective employers. (See ER-59-60; ER-75.)
SB 822 and SB 861 represent unilateral changes to benefits that have been
promised to employees and which they are entitled to receive upon satisfaction
of their pension requirements.
3. The Changes Implemented through the Enactment of
SB 822 and SB 861 Substantially Impair or Breach
COLA Obligations in Violation of Article I, Section 21

In assessing whether a legislative enactment constitutes an impairment,
the court will focus on whether the legislation at issue “would change or
eliminate the states’ obligation under that contract.” Strunk, 338 Or. at 170
(citing Eckles, 306 Or. at 399-400). Where legislation does not alter or
eliminate an obligation, but rather compels non-compliance, it will also
constitute a breach. Id. Even though a breach does not contravene Article I,
section 21, “in accordance with that constitutional provision, such legislation
ordinarily would require payment of damages resulting from the breach.” Id.
Similar to the legislation at issue in Strunk, which, due to the legislation
ordering the Public Employees Retirement Board (“PERB”) to withhold COLA
benefits, was determined to be a breach of the contractual obligation, id. at 224,
the legislation at issue here fundamentally alters the COLA benefit formulas.
SB 822 and SB 861 implement a permanent change to the calculation of COLA
21
benefits. This change is an impairment of public employers’ contractual
obligations to PERS members.
This Court in Strunk noted that it has “yet to determine whether
substantiality of an impairment of a contractual obligation is required to show a
violation of Article I, section 21.” Strunk, 338 Or. at 206. Nevertheless, this
Court concluded the benefit reduction in Strunk would be substantial as the
legislation reduced benefits “in amounts varying between approximately 12 and
20 percent per month.” Id. More significantly, rather than limiting the changes
to being only prospective in nature, the Strunk Court noted that the legislation at
issue “amounts to nothing more than a unilateral decision to reduce benefits
already earned.” Id. at 207. That is precisely what is happening here pursuant
to the provisions of SB 822 and SB 861.
As the Moro Petitioners discuss in their brief, the percentage of loss that
will be felt by PERS members will be similar to those percentages deemed to be
substantial by this Court in Strunk. (See Moro Pet’rs’ Brief at 66-69.) More
troubling is that the legislation places no prospective limitation on its
application. As a result, SB 822 and SB 861 will cause PERS members to lose
benefits they have already earned, amounting to a substantial impairment of
their contractual COLA benefits.
22
4. Oregon Law Does Not Recognize a Public Purpose
Defense to Violations of Article I, Section 21

“The application of the rule that a state may not contract away its ‘police
power’ under Article I, section 21, of the Oregon Constitution, does not
embrace the ‘balancing’ analysis currently employed by the Supreme Court of
the United States in its analysis of the Contract Clause in Article I, section 10,
clause I of the federal constitution.” Hughes, 314 Or. at 14 n.16. Notably, in
Eckles this Court stated its disbelief that “the ‘police power’ doctrine could be
stretched so far as to permit the state to disregard a financial guarantee to
persons” to which the state had a contractual obligation. Eckles, 306 Or. at 399.
Even those jurisdictions that allow for reasonable changes to vested
benefits do so only in limited circumstances. The rule adopted by many of
Oregon’s sister states holds that “[a]lthough pension rights may be modified
prior to retirement, such modifications must be for the sole purpose of ‘keeping
the pension system flexible and maintaining its integrity.’” Wash. Fed’n of
State Employees v. State, 98 Wash. 2d 677, 683-84, 658 P.2d 634, 638 (Wash.
1983) (quoting Bakenhus, 48 Wash. 2d at 701, 296 P.2d at 540); see also Pub.
Employees’ Ret. Bd., 96 Nev. at 722, 615 P.2d at 974 (stating same); Hanson v.
City of Idaho Falls, 92 Idaho 512, 514, 446 P.2d 634, 637 (Idaho 1968) (stating
same); Allen v. City of Long Beach, 45 Cal. 2d 128, 131, 287 P.2d 765, 767
(Cal. 1955) (stating same).
23
For a modification to be found to be reasonable it “must bear some
material relationship to the purpose of the pension system and its successful
operation . . . .” Pub. Employees’ Ret. Bd., 96 Nev. at 722, 615 P.2d at 975.
Where the modification creates a disadvantage to employees, it “must be
accompanied by comparable new advantages.” Id. Absent a new advantage to
counterbalance the legislation’s disadvantageous provisions, a “modification
will be declared unreasonable.” Wash. Fed’n of State Employees, 98 Wash. 2d
at 684, 689, 658 P.2d at 638, 640-41 (finding that the elimination of lump-sum
leave payments from consideration in calculating average final compensation
without the addition of a favorable comparable benefit was unreasonable); Pub.
Employees’ Ret. Bd., 96 Nev. at 722, 615 P.2d at 975 (noting that the legislature
acted unreasonably where it failed to demonstrate that “the change was essential
to maintain the system’s integrity or flexibility”).
In enacting SB 822 and SB 861, the Legislature has not asserted that the
imposed changes to PERS members’ COLA benefit formula was necessary for
the viability of PERS. The modifications were enacted here to allow funds to
be directed at other governmental functions, such as the state’s education
system, and generally reduce employer costs. (See ER-58-67; ER-73-80.)
Furthermore, it cannot be claimed that any substitute favorable benefit was
provided to PERS members. Therefore, even if this Court were to apply the
24
modification rule adopted by its sister states, the enacted legislation at issue
here is not reasonable and must therefore be deemed unconstitutional.
IV. CONCLUSION

As set forth above, SB 822 and SB 861 unconstitutionally impair PERS
members COLA benefit formula. Accordingly, the IAFF respectfully submits
that this court should declare SB 822 and SB 861 to be unconstitutional and
void in whole or in part, or in the alternative that petitioners are entitled to
damages for breach of contract or just compensation.
Dated this 3
rd
day of July, 2014.
Respectfully submitted,
/s/ Sarah K. Drescher
Sarah K. Drescher
OSB 042762
Tedesco Law Group
3021 NE Broadway
Portland, OR 97232
Phone: (866) 697-6015
sarah@miketlaw.com

Thomas A. Woodley
Douglas L. Steele
WOODLEY & McGILLIVARY
1101 Vermont Ave, N.W.
Suite 1000
Washington, D.C. 20005
Phone: (202) 833-8855
taw@wmlaborlaw.com
dls@wmlaborlaw.com

Counsel for Amicus Curiae IAFF
25
CERTIFICATE OF COMPLIANCE WITH ORAP 5.05(2)(d)

Brief Length

I certify that (1) this brief complies with the word-count limitation in
ORAP 5.05(2)(b); and (2) the word-count of this brief (as described in ORAP
5.05(2)(a)) is 5,671 words.
Type Size
I certify that the size of the type in this brief is not smaller than 14 point
for both the text of the brief and footnotes as required by ORAP 5.05(4)(f).

Dated this 3
rd
day of July, 2014.
/s/ Sarah K. Drescher
Sarah K. Drescher
OSB 042762
Tedesco Law Group
3021 NE Broadway
Portland, OR 97232
Phone: (866) 697-6015
sarah@miketlaw.com

Counsel for Amicus Curiae IAFF
26
CERTIFICATE OF FILING

I certify that on July 3, 2014, I filed the original of this Amicus Brief of
the International Association of Fire Fighters by electronic filing with the
Appellate Court Administrator, Appellate Court Records Section, by using the
court’s electronic filing system pursuant to ORAP 16.

CERTIFICATE OF SERVICE

I hereby certify that I served the foregoing Amicus Brief of the
International Association of Fire Fighters upon the following individuals on
July 3, 2014, by using the court’s electronic filing system pursuant to ORAP 16:

Gregory A. Hartman, Esq.
Aruna A. Masih, Esq.
Bennett, Hartman, Morris &
Kaplan, LLP
210 SW Morrison St., Suite 500
Portland, OR 97204
Telephone: 503-227-4600
hartmang@bennetthartman.com
masiha@bennetthartman.com
Of Attorneys for Moro Petitioners











AG Ellen Rosenblum, Esq.
SG Anna M. Joyce, Esq.
AAG Keith L. Kutler, Esq.
AAG Matthew J. Merritt, Esq.
Michael A. Casper, Esq.
Oregon Department of Justice
1162 Court Street NE
Salem, OR 97301-4096
Telephone: 503-378-4402
Facsimile: 503-378-6306
anna.joyce@doj.state.or.us
keith.kutler@doj.state.or.us
matthew.merritt@doj.state.or.us
michael.casper@doj.state.or.us
Of Attorneys for State Respondents






27
William F. Gary, Esq.
Sharon A. Rudnick, Esq.
Peter F. Simons, Esq.
Harrang Long Gary Rudnick PC
360 E. 10th Ave, Suite 300
Eugene, OR 97401
Telephone: 503-242-0000
william.f.gary@harrang.com
sharon.rudnick@harrang.com
pete.simons@harrang.com
Of Attorneys for Respondents Linn
County, Estacada, Oregon City,
Ontario, West Linn School Districts
and Beaverton School Districts, and
Intervenors Oregon School Boards
Association and Association of
Oregon Counties

Harry Auerbach, Esq.
Office of the City Attorney
1221 SW 4th Avenue, Suite 430
Portland, OR 97204
Telephone: 503-823-4047
Facsimile: 503-823-3089
harry.auerbach@portlandoregon.gov
Of Attorneys for Respondent City of
Portland

Eugene J. Karandy II, Esq.
Office of the County Attorney
Linn County Courthouse
104 SW Fourth Avenue, Room 123
Albany, OR 97321
Telephone: 541-967-3840
Facsimile: 541-928-5424
gkarandy@co.linn.or.us
Of Attorneys for Respondent Linn
County




Lisa M. Frieley, Esq.
Oregon School Boards Association
PO Box 1068
Salem, OR 97308
Telephone: 503-588-2800
Facsimile: 503-588-2813
lfreiley@osba.org
Of Attorneys for Respondents
Estacada, Oregon City, Ontario, and
West Linn School Districts and
Intervenor Oregon School Boards
Association

Daniel B. Atchison, Esq.
Office of City Attorney
555 Liberty Street SE Room 205
Salem, OR 97301
Telephone: 503-588-6003
Facsimile: 503-361-2202
datchison@cityofsalem.net
Of Attorneys for Respondent City of
Salem

Edward F. Trompke, Esq.
Jordan Ramis PC
Two Centerpointe Drive, 6th Floor
Lake Oswego, OR 97035
Telephone: 503-598-5532
Facsimile: 503-598-7373
ed.trompke@jordanramis.com
Of Attorneys for Respondent
Tualatin Valley Fire & Rescue










28
W. Michael Gillette, Esq.
Leora Coleman-Fire, Esq.
Sara Kobak, Esq.
William B. Crow, Esq.
Schwabe Williamson & Wyatt PC
1211 SW 5th Ave Suite 1900
Portland, OR 97204
Telephone: 503-222-9981
Facsimile: 503-796-2900
wmgillette@schwabe.com
Of Attorneys for Intervenor League
of Oregon Cities
Rob Bovett, Esq.
Association of Oregon Counties
1201 Court St. NE Ste 300
Salem, OR 97301
Telephone: 971-218-0945
rbovett@aocweb.org
Of Attorneys for Linn County






I further certify that on July 3, 2014, I served two true copies of this
Amicus Brief of the International Association of Fire Fighters upon the
following individuals by United States Postal Service, first class mail with
postage prepaid, on:
George A. Riemer
(Petitioner Pro Se)
23206 N. Pedregosa Drive
Sun City West, AZ 85375
Telephone: 623-238-5039
George.riemer@azbar.org
Petitioner pro se

Michael D. Reynolds
(Petitioner Pro Se)
8012 Sunnyside Avenue N.
Seattle, WA 98103
Telephone: 206-910-6568
mreynolds14@comcast.net
Petitioner pro se

Wayne S. Jones
(Petitioner Pro Se)
18 North Foxhill Road
North Salt Lake, UT 84054
Telephone: 801-296-1552
wstanmgt@gmail.com
Petitioner pro se









29
Dated this 3rd day of July 2014.


/s/ Sarah K. Drescher
Sarah K. Drescher
OSB 042762
Tedesco Law Group
3021 NE Broadway
Portland, OR 97232
Phone: (866) 697-6015
sarah@miketlaw.com

Counsel for Amicus Curiae IAFF

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